Wells Fargo Pegs Servicing Value at Over $10 Billion.

San Francisco -- Wells Fargo & Co. set new quarterly earnings records both in terms of net income and earnings per share, buoyed in part by continued strength in the mortgage lending and higher mortgage servicing values.

Wells' home mortgage unit accounted for $1.4 billion of the company's $8.5 billion in third-quarter revenue.

That's a sharp increase from one year earlier, when the home mortgage unit produced about $913 million of revenue. The 53% gain in mortgage revenue helped Wells Fargo post a 16% increase in total revenue from a year earlier.

Wells Fargo originated $103 billion of home loans in the quarter, up 51% from the third quarter of 2004. Moreover, the company ended the quarter with a $66 billion mortgage application pipeline.

In a recorded earnings call, CFO Howard Atkins said the modest rise in interest rates during the third quarter did little to dampen consumer demand.

"Mortgage volume may be benefiting from the flatting yield curve as consumers switch from home-equity lines to adjustable-rate mortgages and fixed-rate mortgages," he said. He said Wells Fargo's volume was particularly impressive because the company does not offer interest-only or no-doc loans to its nonprime credit quality customers.

Wells Fargo's owned mortgage servicing portfolio climbed to $930 billion, up 20% from Sept. 30, 2004. Moreover, the value of the MSR portfolio climbed to $10.7 billion. That's a valuation ratio of ...